Reshaping of global supply chains will take place, but it will not happen fast

ABSTRACT

The COVID-19 pandemic has drawn attention to high dependence of industrialized countries on Chinese suppliers and led to calls for increasing resilience through diversification of supply sources. This article argues that geographic reshaping of global value chains will require substantial flows of foreign direct investment. As such flows are projected to remain subdued in the next few years, reshaping of global value chains will not happen very fast.

KEYWORDS:

• global value chains
• international trade
• COVID-19

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Using Mexican data, Iacovone and Javorcik (2010) show that export discoveries, i.e., products not previously exported from Mexico, constitute a relatively low share of new export varieties (i.e., product-country combinations) added by exporters. However, the footsteps of a producer introducing an export discovery are followed by other exporters within a short period of time. For approximately half of the new export discoveries, an additional firm starts exporting the same product in the following year. The same happens one year later.

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Beata Javorcik

Beata Javorcik is Chief Economist of the European Bank for Reconstruction and Development (EBRD) in London. She is on leave from the University of Oxford, where she is Professor of Economics and Professorial Fellow at All Souls College. She is a member of the Royal Economic Society’s Executive Committee and a Director of the International Trade Programme at the Centre for Economic Policy Research in London. Before taking up her position at Oxford, she worked at the World Bank in Washington DC. She holds a Ph.D. in Economics from Yale and a B.A. in Economics (Summa cum Laude) from the University of Rochester.